CAPITAL INSURANCE & SURETY CO. VS RONQUILLO
TRADING
G.R. No. L-36488 July 25, 1983
FACTS:
Capital Surety and Insurance Co., Inc., thru its general
agent, executed and issued a surety bond in the
amount of $14,800.00 or its peso equivalent in behalf
of Ronquillo Trading and in favor of S.S. Eurygenes, its
master, and/or its agents, Delgado Shipping Agencies.
The bond was a guarantee for any additional freight
which may be determined to be due on a cargo of 258
surplus army vehicles consigned from Pusan, Korea to
the Ronquillo Trading on board the S.S. Eurygenes and
booked on said vessel by the Philippine Merchants
Steamship Company, Inc.
In consideration for the issuance by the appellant of
the aforesaid surety bond the appellees executed an
indemnity agreement whereby among other things,
they jointly and severally promised to pay the
appellant the sum of P1,827.00 in advance as
premium and documentary stamps for each period of
twelve months while the surety bond was in effect.
On April 30, 1963 or about five (5) days before the
expiration of the liability on the bond, P.D. Marchessini
and Co., Ltd. and Delgado Shipping Agencies, Inc., filed
Civil Case No. 53853 in the Court of First Instance of
Manila against the Philippine Merchants Steamship
Co., Inc., Jose L. Bautista, doing business under the
name and style of "Ronquillo Trading", and the herein
appellant Capital Insurance & Surety Co., Inc. for the
sum of $14,800.00 or its equivalent in Philippine
currency, the loss they allegedly suffered as a direct
consequence of the failure of the defendants to load
the stipulated quantity of 406 U.S. surplus army
vehicles. The appellant was made party defendant
because of the bond it posted in behalf of the
appellees.
Upon the expiration of the 12 months life of the bond,
the appellant made a formal demand for the payment
of the renewal premiums and cost of documentary
stamps for another year in the amount of P1,827.00.
The appellees refused to pay, contending that the
liability of the appellant under the surety bond accrued
during the period of twelve months the said bond was
originally in force and before its expiration and that the
defendants-appellees were under no obligation to
renew the surety bond.
The appellant, therefore, filed a complaint to recover
the sum of P1,827.00 against the appellees in the City
Court of Manila. As earlier stated, the city court
rendered judgment absolving the appellees from the
complaint.
ISSUE: Whether the trial court erred in holding that once
suretys liability under the bond has accrued, appellees are
under no obligation to pay the premiums and costs of
documentary stamps for the succeeding period that it is in
effect?
HELD: NO.
It must be noted that in the surety bond it is stipulated that
the "liability of surety on this bond will expire on May 5, 1963
and said bond will be cancelled 15 days after its expiration,
unless surety is notified of any existing obligations
thereunder." Under this stipulation the bond expired on the
stated date and the phrase "unless surety is notified of any
existing obligations thereunder" refers to obligations incurred
during the term of the bond.
Furthermore, under the Indemnity Agreement, the appellees
"agree to pay the COMPANY the sum of ONE THOUSAND
EIGHT HUNDRED ONLY (P1,800.00) Pesos, Philippine
Currency, in advance as premium thereof for every twelve
(12) months or fraction thereof, while this bond or any
renewal or substitution thereof is in effect." Obviously, the
duration of the bond is for "every twelve (12) months or
fraction thereof, while this bond or any renewal or
substitution is in effect." Since the appellees opted not to
renew the contract they cannot be obliged to pay the
premiums. More specifically, where a contract of surety is
terminated under its terms, the liability of the principal for
premiums after such termination ceases notwithstanding the
pendency of a lawsuit to enforce a liability that accrued WHEREFORE, the appeal is dismissed for lack of merit. The
during its stipulated lifetime. decision of the court a quo is affirmed.